The coronavirus outbreak has caused significant concern among the business community. Up till now, the Government has largely kept the lid on its plans for its economic response.
This changed with today’s Budget. In the first major fiscal event in almost 18 months, the Chancellor announced a £30bn package to prop-up the economy against the pandemic. For small enterprises concerned about their cashflow, there was much to welcome.
HMRC is beefing-up its Time to Pay service, which will enable businesses facing difficulties to spread tax payments over a more manageable timeframe. (A dedicated COVID-19 helpline will be available from today for advice and support in this regard.) Employers with fewer than 250 staff will also be able to reclaim up to a fortnight’s Statutory Sick Pay (SSP) per employee, which follows the government’s earlier notice that SSP would temporarily be effective from day 1 of absence.
To further cut overheads, those in the retail, leisure and hospitality sectors (occupying properties with a rateable value below £51,000) will receive a 100% discount to their business rates for 2020/21. And, for those who already receive Small Business Rate Relief (SBRR) or Rural Rate Relief, the Government will provide a one-off £3,000 grant via local authorities to meet ongoing business costs. Some firms will still seek additional finance to help bridge potential hits in revenue.
Alongside the Bank of England’s measures this morning – which cut interest rates by 50bps and unlocked more funding for commercial lending – the Government has also announced a new Coronavirus Business Interruption Loan Scheme. Through the British Business Bank (BBB), the scheme will guarantee 80% of loans, of up to £1.2 million, at no extra charge.
So, as firms continue to pass on guidance to employees and map their exposure, there is now greater peace of mind that Government will provide a safety net. A full run-down from the Government on their support package can be read here.
The emergency measures did take the shine off other policies – and it’s likely we’ll have another significant fiscal event later this year to follow up. This was, after all, billed as the first major post-austerity Budget, designed to deliver on the Conservative Party’s pledges to drive-up productivity and level-up the regions. The Chancellor did however use the opportunity to outline significant investments for infrastructure, including funds to support strategic road and rail routes, and to amplify mobile and broadband connectivity in remote locales.
Meanwhile, the detail on tackling the skills shortage, which is a key concern for business leaders, was thin on the ground, with the Government’s strategy on the £3bn National Skills Fund and the Apprenticeship Levy likely to be sketched out more over the year.
There were however some promising announcements to support firms to grow, including an extension of the BBB’s start-up loans programme, and a permanent increase to the employment allowance – which effectively means small firms can now employ four full-time employees on National Living Wage without paying any employer National Insurance Contributions.
But while the Chancellor may have focussed on slashing costs, he may have missed a trick in supporting businesses’ offensive strategies. The R&D tax credit was increased slightly, as were capital allowances for structures and buildings, but there could have been more to support much-needed investment in machinery and technology in the present. And, to create more space for his ambitious funding plans, the Chancellor’s cut to the Entrepreneurs' Relief cap, down to £1m, could be a bitter pill to swallow for some, while pressing on with IR35 will cause headaches at an already challenging time.
So while the Chancellor certainly came through for businesses on coronavirus, directors’ praise won’t be unalloyed when it comes to the wider economic agenda.
Tej Parikh, Chief Economist
Tej holds a Bachelor’s degree in Economics from University College London, and a Master’s degree in International and Development Economics from Yale University.
Prior to joining the IoD, he worked as an economic analyst at the Bank of England in roles across monetary and financial policy. Subsequently, he moved to Cambodia where he was a journalist focusing on economic and private sector development for a national newspaper. He has since been a freelance political risk consultant and journalist, covering Europe and Asia in particular.
He has published for numerous international media outlets including Foreign Affairs, the Guardian, and The Diplomat, and is currently an active member of London’s Great Debaters Club.